In the first quarter of this year, new venture investments and the establishment of venture funds recorded the second-highest performance ever, but it was found that 10 out of 16 listed venture capital firms saw a decline in performance compared to the same period last year.
Industry insiders noted that the performance of funds established in the past continues to affect current results, and they anticipate that the performance of the venture capital industry will improve in the next 3 to 4 years as recently established funds begin to be actively deployed.
According to the Ministry of SMEs and Startups on the 24th, the venture investment amount for the first quarter of 2025 reached 2.6 trillion won, an increase of 34% compared to the same period last year. The scale of venture fund formation also rose to 3.1 trillion won, marking a 20.6% increase. This represents the second-highest performance after the boom period for venture investments in 2022.
The increase in the amount of venture funds formed is attributed to a rise in private capital contributions. In the first quarter of this year, the amount of private contributions among venture fund formations reached 2.6 trillion won, a 31.1% increase compared to the same period last year, accounting for 83.5% of the total fund amount in the quarter.
While venture investments increased, the performance of listed venture capital firms declined compared to the same period last year. Excluding SV Investment, whose performance has not yet been disclosed, 10 out of 16 listed venture capital firms experienced a decline.
The performance of venture capital firms is primarily driven by management fees and performance fees based on revenue that exceed the benchmark rate from managing venture funds. Management fees are structured to receive a certain percentage based on the fund size annually, meaning that increases in fund formation amounts directly impact this. Performance fees are paid based on exit outcomes such as initial public offerings (IPOs) or mergers and acquisitions (M&A).
Operating revenue includes profits from the equity method, but these are excluded from the analysis as they represent unrealized gains. Profits from the equity method indicate the value of the equity held by venture capital firms in their venture funds.
The firm that saw the largest decline among the 16 was Mirae Asset Venture Investment, with performance falling 47.4% compared to the same period last year. Next was DSC Investment, which experienced a 38% decline, marking the second-largest drop, while HB Investment fell by 36.1% during the same period.
In contrast, Pluto's, T.S. Investment, Q Capital Partners, and AJU IB Investment saw an increase in performance. T.S. Investment raised the amount of its "T.S. M&A Growth Fund" from 103 billion won to 112 billion won, citing a merger and acquisition (M&A) strategy during a high-interest-rate environment.
Industry insiders point to the time gap between the fund formation and investment execution periods as the reason for the decline in listed venture capital performance despite the increase in venture investments. One venture capital associate noted, “Funds tend to last about 10 years after formation, so even with the current increase in venture investment amounts, past performance significantly influences the current numbers, which appear unfavorable for the first quarter,” adding, “The increased investment amount this quarter will reflect in performance over the next 3 to 4 years.”
Another associate analyzed that given there are more than 200 unlisted venture capital firms, private funds may have gravitated towards those unlisted firms.
However, projections indicate that performance recovery is expected starting in the second quarter. A representative from the Ministry of SMEs and Startups stated, “Following the increase in private investments in the first quarter, we believe that positive signals will continue this year once the planned funds from the policy sector begin to be released from the second quarter.”
The trend of interest rate cuts is also expected to positively impact venture investment activation, as typically lower interest rates increase demand for high-risk assets. The United States lowered its benchmark interest rate in September last year, while South Korea followed suit in October, entering a phase of monetary easing for the first time in several years. This is expected to improve funding conditions and expand venture capital investment capabilities.
Concerns have also been raised that the strengthened listing examination criteria of the Korea Exchange may slow the IPO market, potentially reducing performance fees. However, according to the Korea Exchange's disclosure system, the number of new listings on the KOSDAQ in the first half of 2025 is set to be 38, which is not significantly different from the average of the last three years. A representative from the Korea Exchange stated, “What’s more important is which corporations apply for examination, rather than the intent to strengthen examinations this year.”